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14 Cards in this Set
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 Back
Coupon 
stated interst payment made on bond 

face value 
principal amt of bond that is repaid at end of term also called par value


coupon rate 
annual coupon divided by face value of bond 

yield to maturity 
rate required in the market of a bond 

bond valuation 
pv of face value + pv of annuity C{1(1/1+r)^t} +F/ 1+r^t face value paid at maturity =f coupon of C paid per period a yielf of r per period 

effective yield on bond 
e.g 8% =(1.08)^2 1 =16.64% 

interest rate risk influenced by 
time to maturity coupon rate 

time to maturity 
longer =more risk 

coupon rate 
lower coupon rate =greater int rate risk


YTM when given coupon +maturity rate 
educated guess


real rate 
int rate adjusted for inflation % change in purchasing power


Fischer effect 
r/ship between nonreturns , real returns +inflation 1+R= (1+r) +(1+h) R= nominal rate r = real rate h= inflation 

inflation premium 
portion of nominal int rate that represents compensation for expected future inflation 

interest rate risk premium 
compensation investors demand for bearing interest rate risk
